SAA judgement needs to see airline placed under Business Rescue
11 August 2016
SAA continues to cost the country and its citizens. The High Court judgement handed down this week ordering SAA to pay R 104.6 million plus interest to Nationwide Airlines as a result of SAA’s anticompetitive behaviour is just another nail in the beleaguered airline's financial coffin.
This is certain to plunder SAA into further financial disarray, necessitating the need for the airline to be placed under Business Rescue.
The judgment has set precedent, which should be of concern to the National Treasury and the Minister of Finance, Pravin Gordhan, as Comair is seeking damages in excess of R 1 billion in litigation based on similar circumstances.
SAA now has no wriggling room left, as the remaining R 99 million that it can borrow against the R 15 billion government guarantee is not enough to meet the Nationwide judgement that is likely to amount to some R 140 million once interest charges are added. R 140 million added to the leaked first quarter loss of R 1.3 billion means that SAA will in all likelihood start defaulting on creditor payments.
The Nationwide liquidators do not have the burden of President Zuma holding them back and they will be forced to file for the liquidation of SAA should the inevitable happen and SAA are unable to honour the R 140 million compounded by this court order.
Whilst it has been well known for more than a year, now even those who have denied it can no longer escape the fact that SAA, under its Myeni board and under the protection of President Zuma, is bankrupt and has been and continues to trade recklessly. The Directors, including President Zuma’s very close friend, Dudu Myeni, are undoubtedly in breach of Section 77(3) of the Companies Act of 2008 and must be held personally liable for the losses incurred by SAA that we estimate now amount to some R 11 billion for the 2014/15 and 2015/16 financial years as well as for the first quarter of 2016/17.
The Nationwide High Court judgement, in addition to the estimated R 11 billion of trading losses over the past two and a quarter years, make it incomprehensible that Minister Gordhan continues to be prevented from placing the bankrupt national airline into Business Rescue in terms of section 131(1) of the Companies Act of 2008. This would be by replacing the delinquent board with competent and dedicated people.
Despite the obvious urgency of the SAA matter, it is unfortunate that neither Yunus Carrim, the Chair of the Standing Committee on Finance, nor Minister Gordhan have acknowledged the letters that I sent to them on the 22nd of July 2016. These letters dealt with the finance committee obtaining a legal opinion about the request for an extension to the deadline for the SAA annual financial statements to be submitted and requesting Gordhan to ensure that the SAA 2014/15 annual financial statements be published forthwith.
Instead of replying to my request, the finance committee chair has published a draft 3rd and 4th quarter programme for the finance committee that makes absolutely no provision for the committee to conduct the urgently required oversight over SAA, let alone deal with the request for an extension of time for the SAA 2014/15 financial statements.
Whilst we understand that there is clearly a direct interference in the affairs of SAA by President Zuma, neither Minister Gordhan nor Chairperson Carrim can escape their responsibilities to urgently deal with the SAA debacle. The DA will consequently follow up on these requests in an effort to ensure that SAA is competitive, privatised, self-reliant and well-governed.
As our economy slides ever closer to recession and unemployment rises, the time for inaction is over. The DA will vigorously seek to bring SAA back to financial health and root out all causes that have led to its insolvency.
Issued by Alf Lees, DA Deputy Shadow Minister of Finance, 11 August 2016
